Taiwan’s insurers to continue to move towards global standards, which will enhance their resilience. The convergence will include the adoption of new accounting rules, shift to a new solvency regime and the associated changes to product mix, investment strategy and capital requirements, as well as the promotion of sustainable finance, says Fitch Ratings.
In the past few years, the regulator has tightened regulations to prepare life insurers for new global accounting standards and migration to a new solvency regime.Following these changes, Fitch observed a favourable shift away from savings-type products and towards more foreign-currency products. The regulator has also permitted wider investment scope for better asset-liability management by insurers and promoted risk management that is more aligned with global practices.The regulator also began to address the potential capital gap well in advance by requiring insurers to make up for the shortfall in insurance reserves and it recently introduced a threshold on the net worth ratio to limit leverage. Fitch expects the regulator to release more details on the three-stage road map it announced in July 2020 for the adoption of the new accounting standards and solvency regime.Sustainability has also been moving up the regulatory agenda. The regulator has encouraged the development of green insurance products. Taiwan insurers have also begun to invest in renewable energy projects, and Fitch expects further growth in green investments. Climate-change risks are now on the supervisory radar and will continue to grow in importance in the future.